Advertising nearly killed TV drama, now Netflix will save it

Netflix's goal is "is to become HBO faster than HBO can become us", Ted Sarandos, Netflix's chief content officer, told GQ in an interview recently.

House of Cards is, if you like, the first time it's really showed its hand. At the moment, it looks like Netflix is winning, because HBO and Showtime - the two big, ad-free, premium subscription channels in the US - don't seem in any rush to drop their broadcast schedules in favour of letting people watch all the episodes of Game of Thrones or Californication in one long sitting.

It's easy to compare Netflix to HBO too, because neither cares much about ratings. For both, it's about how the public responds to what they're doing, and how healthy subscriber numbers are. It's a little more complicated if you try to compare it to US ad-supported broadcast TV. Because Netflix isn't a broadcaster, there's no method in place for tracking the number of people who will watch House of Cards. In the UK, broadcasters take viewer numbers from BARB, and in the US, Nielsen runs a similar ratings system.

But Netflix, unlike traditional broadcasters, knows everything about its shows and movies. It knows who streamed what, at what time, on what device, and how many toilet breaks they took - assuming people pause to go to the loo, which doesn't hold true for tablet or phone use, much of which might take place entirely ON the toilet anyway. And it's this that's one of the most brilliant ways about how this new model of TV works.

In America, advertising is everything. When a US network commissions a show, pretty much the first thing it wants to do is secure advertising to pay for it. This is mostly done in something called "upfronts". Upfronts happen in the third week of May each year, and they are when the TV networks present the new shows, as well as try to boost advertiser interest in existing programmes. During the upfronts, the networks will pre-sell advertising based on what they expect the show to achieve in the ratings. And that's where things start to go very wrong for US TV shows.

If a show doesn't perform as promised in its slot, then the network may have to give advertisers their money back, or find them the promised eyeballs elsewhere. However you look at it, this means that an underperforming show won't last long. There have been shows in US TV that have aired one episode, and performed so dismally that the network has pulled them with the rest of their run unaired - this is usually six, nine or thirteen episodes in total. It's cheaper for them to do this, and air re-runs of popular shows in the slot than to mess advertisers around.

But what does that mean for TV? Well, it means that good shows don't get a chance before they are pulled. Lone Star aired on Fox a few years ago, but only managed to get two episodes out to viewers before being pulled. The critics loved the show, but the audience didn't come immediately so it was killed. Who knows how many classic TV shows have never met their potential because of this? It might suit the networks and their bank balances, but it's dreadful for the art of TV.

And Arrested Development - another Fox show, although we're not actually suggesting this is a Fox problem at all - has been rescued by Netflix too. The show, which ran for three increasingly short seasons on Fox, was lauded by critics and loyal fans, but always struggled to find a solid audience. At least, solid enough to maintain its primetime position on one of the most popular TV networks in the US.

When the show was cancelled there were rumours that US premium TV network Showtime - owned by CBS - was interested in picking it up. That may well have been true, but at the time the show's creator, Mitchell Hurwitz, said: "If there's a way to continue this in a form that's not weekly episodic series television, I'd be up for it." Enter Netflix, with a new model and all of the pressure of broadcast TV removed.

It's a model that's also attractive to TV people, who spend their lives worrying about how a pilot episode will be received, and then - as in the case of the show 24 - embarking on making a show without knowing if viewers will ever see the full 22 or 24-episode first season you have planned. If you've ever watched a show like 24, pay attention to the first nine or so episodes, if it feels like a mini-series, that's probably because the people involved weren't sure if it would go the distance, so kept the story self-contained.

Netflix has subscribers, and no advertisers, like HBO and Showtime, but unlike them, it's not beholden to the "old" broadcast model. It makes buying decisions based on revenue from subscribers that probably doesn't fluctuate all that much. This is far easier, and it allows Netflix to order 10, 13 or even 100 episodes of a TV show if it wants, as long as it's got the money in the bank to pay for it. Indeed, the company's order for House of Cards isn't 13 episodes, it's actually 26, and it paid $100 million to secure them. Only Netflix knows if these gambles are worthwhile. But it can stack the deck in its favour to some extent.

One way it can do this is by lining up a DVD and Blu-ray release for some time after it thinks the viewership on its service will have died down. In a year, perhaps House of Cards will appear in shops to buy, ensuring that Netflix is able to make more money. But it could be even better than that: Netflix could, in theory, sell House of Cards to broadcasters too. Imagine that, a broadcast model turned upside down by a 16-year-old company.

It seems likely that House of Cards and Arrested Development, and perhaps even Lilyhammer - although this airs on a traditional TV channel in Norway too - will generate a lot of new subscribers for Netflix, as well as giving the existing customers another reason to keep subscribing. We've already written about how Netflix's global release window and on-demand delivery basically renders copyright infringement pointless, but it can't be overstated.

All of a sudden, the future has taken on a different feel. The Super Bowl, 24-hour news channels and The X Factor all prove that broadcast TV is for sport, rolling news and talent shows, while high-quality TV dramas and comedies can be found on paid TV channels like HBO and Showtime, and now on Netflix.

So that's how advertising killed fiction TV, and how a subscription model will ultimately save it.

Of course, there are things that could go wrong. If everyone subscribes to Netflix for a free trial month, then watches all the House of Cards episodes and cancels, then the firm is in trouble. It's also previously said that it likes TV because people watch slowly. Anecdotal evidence suggests that people are really blowing through episodes of Cards at an amazing rate - some dedicated last weekend to finishing it.

Starting off as a spotty youth who worked in Currys, he moved to the BBC (after getting a degree) where he was an editorial wrangler. A stint writing for Top Gear and co-presenting Sky One's Gadget Geeks completes the picture. Ian has since left Pocket-lint.